Higher Rates Good For Housing Market

With the Fed rigging the interest rate market, potential home buyers remained comfortably on the sidelines waiting for further declines in home prices. Then, this spring, Fed Chairman Ben Bernanke merely hinted that the Federal Open Market Committee (FOMC), may consider scaling back its QE bond buying program. The reaction: go interest rate futures markets – the largest of all the commodity markets in terms of volume and open interest – quickly sold off and adjusted to what it perceived as a new rate environment. Subsequently, mortgage rates began rising and the yield curve (rates by maturity) steepened in anticipation of higher future rates. A death knell for the struggling housing market?
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