Social week 6 Essay Example | Topics and Well Written Essays - 500 words

Social week 6 - Essay Example Mortgage rates spiked up and stock prices fell when the news of tapering hit the market. The Fed though is denying such charges. It is very much unlikely that the Fed will begin its tapering anytime in the near future. But if we assume such an event occurs in the near future, it will put an end to the low interest rates in the mortgage market. The private market will then come back in and come back in strong. There is a huge gap of $85 billion a month and that has to be filled up by someone. When the news of tapering hit the market back in May, 2013, mortgage REITS which made profits by borrowing short term and lending long term mortgages, fell endangering the $ 40 billion industry (The Department of Treasury and U.S. Department of Housing and Urban Development, 2011). So if the Fed begins its tapering anytime in the near future, mortgage REITS have to raise their rates or rather will be forced to raise their rates or else their business will liquidate. The housing market will then t ake a big hit by the rise in the mortgage rates. The May, 2013 news had already made home buyers stop paying their mortgages and the home owners stopped refinancing. The housing market has clearly slowed down since May, 2013 and has showed no signs of regaining the past momentum (Wallison and Pinto, 2012). The US is the only country in the developed world to have such a troubled housing market. It is also probably the only developed country to have a major government role in housing policy. â€Å"Affordable housing† and other policies related to housing has turned the healthy US market into a financial ruin. Moreover the factors that caused the financial crisis are still in force and until those and the government’s role in housing are eliminated, it is very difficult for the US housing market to return back to normalcy (Wallison and Pinto, 2012). Housing finance is largely handled by the private sector in most