Fed’s Taper is Here: What Next for Housing

The long awaited tapering by the Fed is (almost) here as the central bank announced it would reduce its monthly bond buying by $10 billion beginning in January.  The shock experienced last May when Fed Chairman Bernanke hinted at tapering didn’t repeat.  Instead, the market rose on the news with the S&P 500 hitting a new record high at the close. Nevertheless, the Fed’s shift is likely to mean slightly high mortgage interest rates in the new year and less stimulus for the housing markets. While  recent numbers are a bit mixed, housing is ending 2013 is the best shape since before the financial crisis.

A roundup of housing reports in the last few weeks shows that the recovery continues despite occasional soft spots. The National Association of Home Builders sentiment survey is positive at 58 in December, up from 54 a month earlier.  Housing starts are again being reported following a delay caused by the government shutdown last October. Starts were 1.09 million units at  annual rates in November, up from 889 thousand in October and 873 thousand in September.  Permits for new construction were 1.01 million in November, off slightly from October’s 1.03 million. Existing home sales were soft at 4.9 million in November, down from 5.1 million in October.  Applications for mortgages for purchase continue to drift down, off about 8% over the last 12 months. The S&P Home Builders Index of stock prices of major builders is up 6.6% since the beginning of May when  the Fed first mentioned tapering, less than half of the 14.4% gain enjoyed by the S&P 500.

More will be revealed on New Years Eve (December 31st) when the next S&P/Case-Shiller Home Price Indices are reported at 9 AM.

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  1. […] made investors and other money men think about how to position themselves for the impending taper. When the Fed made the official announcement earlier this month, the SP500 reached all new highs – proving that the market is finally ready for the Fed to ease […]

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