Housing braces for looming QE3 tapering consequences

Julie C. Nichols General

HousingWire – Christina Mlynski

All signs are pointing to a new ‘normal" in housing as fiscal drag continues to wane and a rebound in business investment spurs growth. However, there is one risk that could turn the housing upswing on its side, the reduction in the Federal Reserve’s asset purchases, argued Fannie Mae chief economist Doug Duncan. The uncertainty and eventual tapering of the central bank’s bond-buying program is likely to put additional upward pressure on interest rates and lead to some volatility in capital markets. "Although the nature and timing of the tapering are still to be determined, we continue to expect the Fed will scale back its asset purchases and end the program by spring," Duncan stated. The Fed has been signaling their intention to alter its open-ended third round of quantitative easing by slowing purchases later this year. And while the market awaits details — such as timing — investors remain on edge.

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