Bernanke Pauses FINALLY

Yesterday the Fed finally paused to take a breath after more than two years of consistent rises in their short-term Federal Funds rate. The Fed Chairman wants to see what the results of their work are before he recommends any further tightening.

So what does this news mean for the real estate industry? It means that the home owners who have stood by and watched their payments on their home equity lines of credit increase month over month for two will get a welcome break. It also means that the public's fear of increased mortgage rates will likely subside at least for the time being. In fact, mortgage rates are the best they've been in five months and we are back to the levels they were at in March.

An interesting point of note from many of the analysts is the spread between the mortgage rates and the federal funds rates. They are closer today than they have been in years which many say will result in a trough of activity. It's not so much a cause and effect from the actual rates themselves, but as the overall economic effects caused by the Fed's tightening start to spread, mortgage lenders, as long as the bond markets allow, have limited their rate increases to maintain business. Which is good news for borrowers. And further more, as this narrow spread will unlikely be able to maintained, the good news is that historically it's not the mortgage rates that increase to widen to spread to more normal levels, it's the Fed rate that decreases.

So here's to hoping that historical trends hold and that the Fed is done with its tightening bias for a good while.