Although interest rates will rise, Jim Huntzinger, Tulsa-based BOK Financial's chief investment officer, is optimistic the housing market economy is strong enough to withstand the end of the Federal Reserve's multibillion-dollar stimulus program, called quantitative easing.
“Housing prices have moved up pretty dramatically, and I think the housing market is in pretty good shape to weather the storm of higher interest rates without it being too much of a setback,” Huntzinger said.
Federal Reserve Chairman Ben Bernanke announced plans last week to begin drawing back the central bank's $85-billion-a-month bond repurchasing program known as QE3 later this year if the economy continues to improve.
“All of this is based on the belief that the market will continue to improve,” said Huntzinger, who takes solace in the fact that Bernanke said the Fed would reconsider its decision to taper off quantitative easing if the nation's slow economic recovery begins to falter over the next few months.
The Fed's announcement led to a sell-off in the bond market this week and caused U.S. stocks to sink and mortgage rates to jump.
The markets were not anticipating the Federal Reserve's announcement that it would end quantitative easing, Huntzinger said.
“I think this is a case of the Fed getting the timing wrong on the announcement — the market was obviously surprised by the announcement last week,” Huntzinger said. “The good news is that the news is out, and we know now what the Fed is thinking.”