Posted by Leonard Steinberg on August 19th, 2013

It is a certainty that quantitative easing will be tapered: it is not a question of if, as much as when. It’s a new world for what tapering could mean for the markets as we have no historical benchmark. Is tapering an indication that the economy is improving? Most would agree that tapering would indicate confidence in the economy’s ability to grow without this stimulus. US stocks are out-performing BRIC country stocks these days: will this accelerate BRIC real estate buyers in the USA, specifically New York and Miami, to buy property as a hedge against their country’s weakening economic data? Or will the excess foreign-buyer-cash dry up?

Slowing economic growth in countries from India to Indonesia is driving investors to pull funds from emerging markets, spurred by speculation the Federal Reserve will taper its stimulus program. U.S. home sales probably climbed to a three-year high, data may show this Wednesday, the same day minutes of the Federal Open Market Committee’s July meeting are released.

Officials will probably begin to scale back their $85 billion in monthly asset purchases in their program of quantitative easing next month, according to 65 percent of economists surveyed by Bloomberg from August 9th. Some say the markets have already priced in the prospect of tapering……we shall soon find out.

We are entering a new phase of the economy, and in the unknown always lies fear. Fear is not good for markets. Least of all real estate markets. The good news is if tapering is instigated, we should believe the economy is indeed improving and the speed at which bumps are overcome these days could fuel a quick adjustment to the new reality.