Quantitative easing, expectations, and the mortgage industry

by MPA05 Nov 2015
One of the big questions right now in the mortgage industry centers around quantitative easing. Is the Fed going to introduce more QE to stimulate the economy? We see other countries employing such programs to stimulate their economies. Is it only a matter of time before we see more QE in the US?

Of course, as we all know, these expectations in and of themselves might have the same effect as quantitative easing itself. When investors believe that the Fed is going to do something, they often act as if it has already happened. So, the question we in the mortgage industry must ask ourselves is, "Is all the hype around QE good for the industry?"

When we ask whether or not something is good for the mortgage industry, it's often a more complex question than it may seem. What we should be asking is, "How is it good and how it is bad for the industry?" As far as QE is concerned, there will likely be short term benefits. But, as we've seen, there's always the risk of a bubble--and it may not be so great for the industry in the long run.

Just remember, if we do see more QE, there will come a time when that QE is reduced again. And, at that point, expectations will also be important--but they will at that time negatively influence the mortgage industry. If people expect rates to go up, the market will slow just as much as it picks up when rates go down. So, QE or no QE, develop your strategy with caution. What goes up must come down. Don't let the thrill of going up blind you to the reality of coming back down.
 

Poll

Is TILA-RESPA a good or bad thing long term?