New home sales down, Fed to stop buying securities

Two recent reports on the housing sector is adding more fuel to the market deterioration. First new home sales figures dropped for the month of December, including the decline of mortgage applications and building permits, which are the traditional indicators of the market. Second is the Fed announcement that they will stop buying mortgage back securities this spring. What this means is that the Fed is buying these notes to keep mortgage rates down. Once this ceases the mortgage rates could jump quite a bit. Analysts project the rise of rates could jump as much as 1% or more. The Fed states this is due to stabilizing markets. Is it so? Or is this also due to the excessive spending has reached non sustainable levels of spending.

If consumers read the "tea leaves", home sales are likely to slow due to higher interest rates, continued high unemployment, more troubling signs from the economy and who knows what else. So what's a potential home buyer to do? BUY NOW, that's right, buy now. Economically if you can afford to, now might be the best opportunity. Even if the market values decline in the short term future, the savings will be more than offset by higher interest rates and possible inflation. No matter what is going to happen in the markets, at least you have a tangible asset land, brick and mortar, a home, something physical not a paper investment. Can Wall Street say that?