Housing’s “Big Two” Numbers
Two numbers loom especially large in the national housing market right now: $8,000, and 4%.
The first number is the tax credit available to eligible home buyers. Coincidentally or not, that’s approximately what annual payments come to on an average-priced U.S. home (now about $175,00).
To balky Buyers who’ve been waiting for an irresistible deal, the government is basically saying, “how about free housing for a year? Is free cheap enough??” (Again, you have to qualify, so not all Buyers will get such an attractive deal.)
The second number, 4%, is the whispered target number for 30-year mortgages.
Whether they get there or not depends.
Based solely on yesterday’s announcement that the Fed will buy up to $1 trillion in mortgage-related securities, rates instantly fell about .25%, from 4 7/8% to 4 5/8%.
Whether they keep dropping depends on how quickly the Fed deploys the money, and whether all that new money (literally) isn’t negated by inflationary concerns.
Observers will recall a similar rate drop last Fall, after a similar (but smaller) announced Fed stimulus. In that case, the drop turned out be short-lived when the promised money didn’t materialize (or at least not fast enough for the market).
