This is the first installment of HSH.com’s Think Tank series which features in-depth question and answers from the nation’s top real estate professors and professionals.
The Federal Reserve’s Quantitative Easing program has provided great benefit to American home buyers and homeowners alike by propelling long-term interest rates, including mortgage rates, down to record lows.
We asked Raphael Bostic, Ph.D., director of the Bedrosian Center on Governance at the University of Southern California, Richard Green, Ph.D., director of the Lusk Center of Real Estate at the University of Southern California, and Peter Muoio, Ph.D., Managing Director at Auction.com to offer their perspectives on how the tapering of QE will impact the mortgage and real estate markets.
A: There will be a very small impact in the short term. Getting a mortgage has been less about mortgage rates and more about credit availability. Mortgage rates haven’t prevented homebuying—it’s access to credit that has prevented it. It’s more about the access to credit not the price of credit.
The Bernanke Fed has handled coming out of the housing crisis really well. Housing recovery would have taken a lot longer if not for QE. Housing is at a good place right now in terms of supply and demand. Over the long term, we won’t see any big increases in home prices; we’ll see a more normal housing market in the years to come. With rates rising as a result of QE’s tapering, mortgage lenders will again realize how profitable lending can be.