Thinking of selling?

The Federal Reserve, at its recent policy meeting, hinted at possibly raising the interest rate, bucking the recent trend of its policies.

For the past years, the Fed has been keeping a tight rein on short-term interest rates. Short-term rates have been near zero since December  2008. Some Fed officials argued at past policy meetings that increases are necessary to prevent the economy from “overheating.” Increases in the national unemployment rate have prompted the discussions of this plan.

The Fed reduced its monthly bond purchases by $10 billion to $65 billion in January.

The Fed’s program of bond buying started at the end of 2012 and was intended to lower long-term interest rates to promote spending, hiring and investment. Now there has been some weak economic data since the end of last year (i.e., creation of jobs and results of retail sales) and officials have indicated that interest rates would not increase short-term until the unemployment rate decreased to 6.5%, which is a 10th of a percentage point away from what it is now.

However, some others contend that if the unemployment rate is 6% by the end of this year, it will pressure the Fed to increase short-term interest rates.

In the past, the Fed adjusted the interest rate based on the unemployment rate, inflation or economic production and inflation.

Fed officials are considering dropping the jobless rate as a factor in determining policy. Some of the reasons are that the unemployment rate is not an accurate indicator as to the health of the economy. Some people have dropped out of the work force and some have retired and are considered unemployed.

Last week, mortgage rates increased for the second consecutive week. This followed the increase in the 10-year Treasury yield.

Existing homes sales decreased in January of this year. The inventory available for sale continues to be challenging for buyers and is raising home prices in many areas of the country. Total existing-home sales (all types) decreased 5.1% from December to January. The decline in home sales has been attributed to the polar vortex, and the weather is adversely impacting not only home sales around the nation but also home construction.

The median existing-home price for all housing types in January increased 10.7%.

Distressed homes (foreclosures and short sales) accounted for 15% of January sales (11% were foreclosures and 4% were short sales) as compared with 14% in December and 24% in January 2013. Homes in foreclosure sold for 16% below market value, and short sales were discounted 13%.

First-time buyers accounted for 26% of home sales in January, which is the lowest level since October 2008. All-cash sales constituted 33% of transactions in January and were slightly above (at 1%) those in the prior month. A majority of cash buyers are investors and 20% were individual investors. The figures also show that 70% of investors paid with cash for homes in January.

It used to be buyers sitting on the fence waiting for the right time to buy. Now it appears that homeowners have been sitting on the fence waiting for the right to time to sell. With interest rates expected to increase, this is the time to consider listing.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]  

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