{"id":761,"date":"2006-12-12T10:03:07","date_gmt":"2006-12-12T17:03:07","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=761"},"modified":"2007-01-24T14:13:50","modified_gmt":"2007-01-24T21:13:50","slug":"why-the-fed-matters-to-real-estate","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/761\/why-the-fed-matters-to-real-estate\/","title":{"rendered":"Why The Fed Matters to Real Estate"},"content":{"rendered":"<p><img decoding=\"async\" alt=\"Ben Bernanke Headshot\" src=\"http:\/\/federalreserve.gov\/bios\/gifjpg\/bernanke_ben.jpg\" align=\"right\" \/>The <a title=\"Federal Open Market Committee\" href=\"http:\/\/www.federalreserve.org\">Federal Open Market Committee<\/a> meets today and will keep the Fed Funds Rate unchanged at 5.250%. It is not what the Fed does, however, that should concern Americans. It&#8217;s what the Fed <em>says<\/em>.<\/p>\n<p>First, a clarification. The Fed Funds Rate is directly tied to Prime rate which impacts lines of credit for businesses and homeowners. Ben Bernanke &#038; Co. do not control mortgage interest rates which are determined by the mortgage-backed securities markets. This is another conversation for another time.<\/p>\n<p>When the Fed adjourns this afternoon, it will issue a press release in which it will discuss the economy and inflation. The statement &#8212; not the interest rate &#8212; is the news worth watching because inflation can unravel markets and push mortgage rates back to their highest levels of the year.<\/p>\n<p>The chain of events is pretty logical:<\/p>\n<ul>\n<li>If inflation is growing at a faster clip than the Fed wants, it will tell the markets<\/li>\n<li>If it tells the markets, markets will know that the United States Federal Reserve expects the dollar to lose value over time<\/li>\n<li>If the U.S. dollar is expected to lose value over time, the U.S. dollar will be &#8220;worth less&#8221; to foreign nations<\/li>\n<li>If the U.S. dollar is &#8220;worth less&#8221; to foreign nations, foreign nations will buy fewer U.S.-denominated securities because the relative returns will be less, too<\/li>\n<li>If foreign nations buy fewer U.S.-denominated securities because the relative returns is less, the demand for mortgage-backed bonds will drop<\/li>\n<li>If the demand for mortgage-backed bonds drop, the price of mortgage-backed bonds will drop<\/li>\n<li>If the price of mortgage-backed bonds drops, the yield of mortgage-backed bonds will increase<\/li>\n<li>If the yield of mortgage-backed bonds increases, then mortgage rates go up for Americans<\/li>\n<\/ul>\n<p>It&#8217;s a long road to get to the conclusion, but this is the manner in which the Fed impacts real estate and mortgage lending. So when your local daily shows the headline &#8220;Fed Leaves Rates Unchanged&#8221;, don&#8217;t think the coast is clear. Read the article and dig a little deeper &#8212; it&#8217;s not what they did, it&#8217;s what they <em>said<\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Federal Open Market Committee meets today and will keep the Fed Funds Rate unchanged at 5.250%. It is not what the Fed does, however, that should concern Americans. It&#8217;s what the Fed says. First, a clarification. The Fed Funds Rate is directly tied to Prime rate which impacts lines of credit for businesses and [&hellip;]<\/p>\n","protected":false},"author":14,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,2,8],"tags":[],"class_list":{"0":"post-761","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-enduring-interest","7":"category-general","8":"category-investment","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":2529,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2529\/amaze-your-friends-why-the-surprise-fed-funds-rate-drop-isnt-impacting-mortgage-rates\/","url_meta":{"origin":761,"position":0},"title":"Amaze Your Friends : Why The &#8220;Surprise&#8221; Fed Funds Rate Drop Isn&#8217;t Impacting Mortgage Rates","author":"Dan Green","date":"January 22, 2008","format":false,"excerpt":"Advanced Fiscal Literacy For Real Estate Professionals The Fed Funds Rate is a fair proxy for economic health.\u00a0 When the economy is growing, the FFR\u00a0rises to fight inflation. When the economy is slowing, the FFR\u00a0falls to fight \"the absence of inflation\" (i.e recession). If inflation is the enemy of mortgage\u2026","rel":"","context":"In &quot;Lending&quot;","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":982,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/982\/peeking-into-bernankes-crystal-ball\/","url_meta":{"origin":761,"position":1},"title":"Peeking into Bernanke&#8217;s Crystal Ball","author":"Brian Brady","date":"February 2, 2007","format":false,"excerpt":"Do you want to look into the crystal ball through the eyes of Federal Reserve Chairman, Ben Bernanke? Will that help you predict mortgage rates and housing prices for 2007? I try to outguess the Fed all the time and I've decided that we'll see a significant decline in short-term\u2026","rel":"","context":"In &quot;Real Estate&quot;","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":10486,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/10486\/a-disaster-for-democrats-yeah-but-what-about-the-rest\/","url_meta":{"origin":761,"position":2},"title":"A Disaster for Democrats?   Yeah, but what about the rest?","author":"Tom Vanderwell","date":"December 3, 2009","format":false,"excerpt":"This is just ugly.....Let me attempt to explain.\u00a0\u00a0 Goldman Sachs came out with their economic forecast.\u00a0\u00a0 Here's a brief summary of it:Mediocre growth until late 2011.Unemployment peaking at 10 3\/4 in the middle of 2011.Extremely low inflation through 2011Low interest rates through 2011 (at least the ones the Fed controls.)So,\u2026","rel":"","context":"In &quot;Group Therapy&quot;","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8184,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/8184\/the-fed-translated-6\/","url_meta":{"origin":761,"position":3},"title":"The Fed Translated&#8230;.","author":"Tom Vanderwell","date":"April 30, 2009","format":false,"excerpt":"Yep, it's that time again.\u00a0\u00a0\u00a0 The Fed met yesterday and today and came out with their announcement this afternoon at 2:15 pm.\u00a0\u00a0 I promise that this one won't be as long as the last Fed Translated was.As usual, my comments are in bold and italics.....April 29, 2009For Immediate Release:Information received\u2026","rel":"","context":"In &quot;Group Therapy&quot;","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":9504,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/9504\/the-fed-translated-and-why-it-isnt-good-for-interest-rates\/","url_meta":{"origin":761,"position":4},"title":"The Fed Translated &#8211; and why it isn&#8217;t good for interest rates&#8230;..","author":"Tom Vanderwell","date":"August 13, 2009","format":false,"excerpt":"My apologies for taking almost 24 hours after the Fed to get this up.\u00a0\u00a0 As I\u2019ve done in the past, I want to go through what the Fed said yesterday and give some insights into what I think it means for the housing and mortgage markets.\u00a0\u00a0 You can find the\u2026","rel":"","context":"In &quot;Dirty Laundry&quot;","block_context":{"text":"Dirty Laundry","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/dirty-laundry\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5378,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/5378\/mortgage-market-week-in-review-14\/","url_meta":{"origin":761,"position":5},"title":"Mortgage Market Week in Review","author":"Tom Vanderwell","date":"November 1, 2008","format":false,"excerpt":"I want to apologize for the delay in getting this out until Saturday.\u00a0\u00a0 Due to some technical difficulties and some new things I'm going to be implementing, Friday was spent working on computer issues.\u00a0\u00a0 Yeah, I know, a fun way to spend a Friday..... So, here we are at the\u2026","rel":"","context":"In &quot;Lending&quot;","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/761","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/14"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=761"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/761\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=761"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=761"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=761"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}