Las Vegas Homes, Condos, Land and Commercial Real Estate Blog

The Federal Reserve Bank is winding down their massive purchasing program of Mortgage Backed Securities and this translates to home loan rates rising in the near future. Hate to say it, but I have repeatedly written that the main reason to invest in Las Vegas real estate in particular and real estate in general is the upcoming inflation.

The amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling and should   end by March 31st, and they are clearly trying to ration out the remaining portion.

Last week, the Fed bought $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment.

 As you can see 95% of the $1,250,000,000,000 (zeros eventually add up) has already been spent. This means that The Fed purchased the mortgage for about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.

It is all about risk management and the banks which sold these mortgages had virtually no risk since they bundled their loans and sold it to the Fed. Banks made free money, however now they have to sell their mortgages to investors or keep it and the banks are not in the business of keeping mortgages themselves any longer. You want proof, one of our clients who had about a large sum of money in an IRA account and flawless credit who wanted to get a mortgage on his purchase precisely because of inflation could not get a loan to buy a condo in Las Vegas because his loan could not be sold to the Fed. He eventually got the loan when he threatened to sue the bank where he had his IRA money for denying his loan.

Given that the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power, will wane.

 Those who can take advantage of currently low home loan rates should not wait, since the clock on these historically low rates is ticking.

Those who need to finance their Las Vegas home or condominium purchase while foolishly waiting for the bottom, are missing the freight train of high interest rate which will negate any further price decline.

I would love it if you let me know who you are by adding my Las Vegas real estate page on Face Book or Masoud’s My Space Page as a friend.