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Sooner or Later, Fed Changes Impact Carlsbad Real Estate Home Loan Rates

Will Fed Changes Affect Carlsbad Real Estate buying Power?

On January 6, the Senate confirmed Janet Yellen to head the Federal Reserve’s Board of Governors, making it the first time ever that a woman has led the nation’s most important financial institution. In some respects, it makes her the most powerful woman in the United States.

As with every personnel change in the Fed, Yellen’s rise has fostered plenty of concerns about the direction the Federal Reserve will take under her leadership. Since it’s the institution that determines the federal funds rate—which in turn dictates how much businesses and individuals pay for their loans—any change in Federal Reserve policy has a significant impact on the Carlsbad Real Estate Market and nearby area home loan rates. Sooner or later, those rates affect just about all of us who deal with real estate in North County San Diego, particularly, Carlsbad, Encinitas, Cardiff By The Sea, La Costa Real Estate, Oceanside, San Marcos, Rancho Santa Fe etc.

So, what clues do we have about the direction Ms. Yellen is likely to lean? One came just before the financial crisis. Before the financial meltdown, Yellen expressed concerned. In 2005 she is quoted as saying, “Analyses do indicate that house prices are abnormally high, that there is a “bubble” element, even accounting for factors that would support high house prices.”

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Is this true for Carlsbad Real Estate and Surrounding Areas?

Last year was an excellent one for Carlsbad real estate yet according to the Standard & Poor’s Case-Shiller Index, national housing prices are still 20% off the peaks set in 2006 in many areas. Although real estate in Carlsbad my be a bit less off, perhaps 15% off from 2006. Research from real estate website Trulia shows that U.S. housing is still 4% undervalued (compared with a 39% overvaluation reached at the 2006 peak). Happily, Yellen, an early identifier of the previous housing bubble, has not expressed similar concerns about today’s real estate market. So, if you are looking for a home in Carlsbad or local areas, know that I’m an experienced Carlsbad Real Estate Agent.

In 2012, the Federal Reserve’s previous leadership announced an unemployment threshold of 6.5% as the point at which it would consider raising interest rates. During Yellen’s first testimony as Chairman, she stated that the Federal open market committee would likely keep interest rates near zero well past that mark. In Yellen’s view, the recovery in the labor market is far from complete. As evidence, Yellen pointed to 7.1 million people who are mired in part time work but who would prefer full time jobs—and to the 3.6 million people who have been unemployed longer than six months.

For Greater San Diego & Carlsbad Real Estate home loan rate watchers concerned that a rise in rates might dent Carlsbad real estate values, the new Chairman has sounded some reassuring notes. In her recent address to the Committee on Financial Services, Yellen explicitly stated that she expects “a great deal of continuity in the FOMC’s approach to monetary policy.”  That could mean that interest rates for local home loans might gradually rise, it’s not likely to be precipitous.


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The bottom line: dramatic rises in interest rates are unlikely under Yellen’s watch, but those considering getting a home loan who have not yet takena dvantage of still low interest rates might do well to consider doing so. If that’s you or someone you know looking to buy a home for sale in Carlsbad, La Costa, Aviara, Olde Carlsbad, Calavera Hills, San Elijo Hills, Rancho Carrillo, Olivenhain etc. I’m your guy to help you with your real estate needs. My in-house team of lenders with San Diego Funding will be able to help you with any home loan questions you may have. Feel free to call Chris Rocco at (858) 254-4325 or Josh Jelsing at (858)-442-9667, anytime. Feel free to contact me anytime directly at (760)207-7245.


About Dustin Brazil
Im a realtor in Carlsbad. Call me to help you or somebody you know buy or sell a home in and around Carlsbad CA