Current trends in Mortgage Rates-Incline Village and Lake Tahoe:
Although the price of gold on the futures market rose slightly last week, it lost 0.8% in the last few weeks, a continuation of its longer-term decline. The price of silver is falling as well. What we have here, according to Debarati Roy and Nicholas Larkin of Bloomberg, is investor speculation that the U.S. Federal Reserve will continue reducing stimulus, strengthening the dollar and cutting gold’s appeal as an alternative investment.
This turns out to be very important. It would have been possible for the price of gold to rise in international markets in anticipation of lower world currency rates and a slowing world economy-since it is now enjoying less of the obvious support of the Federal Reserve’s QE3 program. Gold, after all, is what investors all over the world turn to when it appears that their anxieties will rule the day and currencies will face possible losses, while the economy takes a possible hit.
The price of gold, therefore, could be seen recently as something of an acid test for the Fed’s plan to taper its support of low U.S. interest rates. So sensitive have the markets been about the possibility that a tapering by the Federal Reserve could bring a very negative reaction from investors all over the world-an earlier suggestion that it was time to begin the tapering had inspired an immediate negative reaction, after all-that most observers watched the possible demise of the quantitative easing (QE) program with tremendous fear.
But the markets-notably the precious metals and interest rate levels-have taken a rather benign course. Gold has fallen to a 2-month low. Silver has fallen further. And the Freddie Mac average rate for 30-year fixed-rate mortgages, after a relatively brief spike, has settled again to levels reached several weeks before the announced tapering. Increased mortgage applications suggest growing confidence in the real estate market as well.
Contrary to earlier concerns, therefore, the possibility that the Fed may announce still further tapering-reducing the amount of mortgage-backed bonds incrementally-seems to calm the markets, rather than to roil them.
A healthy and strong real estate market, though, isn’t inevitable this year. Still, we have unusually helpful indicators to watch. Here are two: First, there’s the price of gold, which is telling us the markets are calming, Second, there’s the jobs market, which-according to Celia Chen of Moody’s Analytics-will soon improve, giving the real estate market a healthy shot in the arm. Stay tuned.