Investors of all stripes both big and small are paying close attention to the markets. Of course every investor needs to pay attention to economic data to some degree if only to make sure the information provided to them by their advisers match up with the real world. The recent selloff in the Dow andrates still low for investors the like is the result of a weakening in the Chinese markets that directly affect currencies around the globe.

The losses may or may not be a correction but for right now it sort of feels like it. And money is flowing out of stocks and back into bonds and mortgage bonds are certainly part of that group. That means rates are not going up as feared but actually falling. What’s going on? Wasn't the Fed's announcement to slowly end QEIII supposed to bring mortgage rates for real estate investors closer to true market?

The initial, correct response is that money is flowing into safety creating a greater demand for fixed instruments of all maturities. But the Fed’s decision to end the stimulus program was supposed to increase rates not drive them down further, right? Yes, that’s right, but it appears that the market’s reaction to the Fed ending the QEIII program might have actually occurred last summer when the Fed first announced the ultimate end of the program.

But there’s another factor at play. Yes, the Fed is tapering but really by not very much. Relatively speaking of course, we’re still talking about $65 billion in mortgage backed and Treasury purchases after all. Yet what hasn’t really been talked about is the reduction in new mortgage loans over the past few months. Compared with the same time last year, mortgage applications are down and by many estimates applications are down by more than half.

The Fed’s QEIII stimulus however is only down by about 20 percent meaning the Fed is really buying more of a share with the same dollars. The impact is still strong as there is no dollar-for-dollar tradeoff between rates and the amount of stimulus. If new mortgages remain tame through the next two quarters, mortgage rates for real estate investors will remain in their current range.