Bond Market Tapering And Real Estate

by I Hsiang Tsai

Remember when the Chariman Bernanke talked about adding stimulus at a slower pace, how it impacted the mortgage rate? Yes it did push up the cost of mortgages for millions of Americans. 

So some of you may think that it is just talking and that the interest rate goes up and down, but one thing you can’t deny is that the interest rate has been going up and not down back to 3.5%.  

The meeting held by the Fed policy makers will likely lower the monthly bond purchase by 10 billion instead of 20 billion as was expected prior.  So what does the tapering means for the home buyers and sellers??

4.57 percent was the average rate on a 30-year fixed-rate loan by Sep 12, 2013 and already we are seeing potential buyers are looking eagerly to find a suitable property before the rate goes up any higher.  Higher the mortgage rate means more people will have hard time qualify for the loan.  It also means the possibility of lowering consumer spending which will also affect the economy. 

We understand Hawaii’s property has never been too cheap to start with compared to many states.  Most of us look at it as a cost of living in a paradise.  We also watched the news talking about how the cost of home will continue to rise and the affordability window is closing on us.  But I think what it is trying to say is that it will be harder to get a loan as intereate rate rises even higher and that the possibility of the loan amount will be smaller.  If you have a lot of cash laying around then it may not be a problem for you, but for most of us it will be a problem.  

While Bernanke’s June 19 remarks that he may reduce securities buying this year and halt it by mid 2014, have you as a buyer or seller started to think about what is the best course for you?

As a seller, have you thought about how would mortgage rate increase impact you selling your home?  Some may think that this is a great market to sell your house when buyers are out there looking.  It is correct as long as there are qualified buyers out there.  But what if when those buyers no longer qualified to buy the property at or near your asking price due to rising interest rate?  It means although demand is there yet what good does it do if less people are able to buy even if they want to?  One can hope that investors with cash will just come and buy.  But overall, the rising of interest rate, less qualified buyers, and rising asking price by the sellers will also affect the sellers themselves in the end.  

We will keep an eye on how the tapering of bond purchase will be and how it affects the mortgage rate and overall housing market.  Please feel free to comment and discuss your views and opinions.  I also hope that when you or your friends have the need for real estate in Hawaii, you will consider having me and my team to help you.   Please feel free to email us at This email address is being protected from spambots. You need JavaScript enabled to view it.  or This email address is being protected from spambots. You need JavaScript enabled to view it. should you have any need for real estate service.