Thank You, Fed. Now what?

On behalf of the American homeowner, I'd like to say, "Thank You" to our Federal Reserve for buying $1.25 Trillion in Mortgage Backed Securities over the last year and a half. Their intervention has helped keep mortgage interest rates at all-time lows, allowing homeowners to refinance into more affordable mortgages and allowing homebuyers to achieve the dream of homeownership with less strain on their budget in an economy that requires a more discriminating look at how we spend.

The Fed's program of purchasing has ended. Now the big question is about to be answered. What will rates do now that the Fed isn't buying these bonds? My research tells me that most experts agree that rates will go up. With less demand for these bonds, prices will be forced down and mortgage rates will be forced up. We expect to see an initial spike in rates, which may be tempered as less mortgages get written. At the very least we expect an increase in volatility.

So, what does this mean to you? That depends on your situation:

- the homeowner: if you haven't refinanced out of your Adustable or High-Rate loan, this could be your last chance. Qualifying is still a challenge for many, but if you qualify, it is worth one last look.

- the prospective home buyer: with rates still hovering near all-time lows, homebuyer tax incentives and low home prices this is the perfect opportunity to buy whether you are a first timer or even if you are looking to trade up (or down).

- the real estate professional: while we know that people will continue to buy homes at higher rates and without tax incentives, it is our responsibility to let the people know that TIME IS OF THE ESSENCE if they want to take advantage of these opportunities. All good things must come to an end and unfortunately we may very well see the end staring us in the face. Think of how grateful your buyers will be when they see how you encouraged them to act and others are accepting higher rates, paying higher prices and NOT receiving tax credits.

Now that rates are subject to increased volatility, I'll be posting more regularly, commenting on how the market will react without the Fed's support. Stay tuned and hold on to your hat!