The exodus of investors erased almost $6.4 billion from emerging markets equity funds during the week ended on Feb. 5, the largest outflow since August 2010, according to a Citigroup Inc. report. That has spurred a currency crisis in Argentina and Turkey while economic data points to slower economic growth in China and Russia.
Yellen’s Plan
“We’re seeing the results of a herd mentality as investors exited some of the riskier corners of the world and come back to the states,” CoreLogic’s Khater said.
Janet Yellen, who took over as chairman of the central bank on Feb. 3, said in Congressional testimony yesterday that the Fed has been “watching closely” the volatility in global financial markets. She said that “our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook.”
Only a “notable change in the outlook” for the economy would prompt policy makers to slow the pace of tapering, Yellen said. She repeated the Fed’s statement from the conclusion of its meeting last month that asset purchases aren’t on a “pre- set course.”
The impact of the market rout is felt in Indianapolis, where Underwood is hunting for a three-bedroom house costing about $125,000. The drop in mortgage rates could save her about $5,000 if she stays in the house for 10 years.
Temporary Reprieve
“I don’t know what’s behind the fall in rates,” said Underwood, who is now a renter. “I’m looking for something I plan to be in for a long time, so getting a lower rate is going to result in a big savings.”
Cheaper borrowing costs may not be enough to increase U.S. home purchases for the year. The pace of sales probably will slow in 2014, the third year of the real estate recovery, as the 28 percent increase in property prices since January 2012 puts homes out of reach of some Americans.
Sales of new and previously owned homes will gain about 3.1 percent to 5.7 million, a third of the increase seen in 2012 and 2013, Fannie Mae’s Duncan said.