What does the Federal Reserve’s recent rate hike mean for real estate?
In June 2017, the Federal Reserve increased the federal funds rate by about 0.25%, and they’re expected to continue to do so over the course of 2017. Whenever there is movement by the Fed, it often garners a lot of attention, but I don’t think these increases will have a detrimental impact on real estate, at least in the short term.
Why?
For one thing, mortgage interest rates have actually moved down in the wake of the recent increase. In fact, it’s pretty common for mortgage interest rates to move in the opposite direction of the federal funds rate, at least in the short term, and this has happened the last couple of times the Fed increased its federal funds rate.
“The real estate market continues to be extremely healthy.”
Secondly, the economy continues to do relatively well. Unemployment is relatively low, household spending is up, and we’ve seen three years of growth. In those last three years, we’ve also seen increases in equity for homeowners all across the U.S. All of that equals potentially more stimulation for our economy.
Third, even though federal rate increases tend to cool off the economy, many experts believe that a number of variables particular to our situation point to a stimulation of our economy. Interest rates have been so low for so long that most experts think that increases in rates will ease pressure in the financial system and incentivize more mortgage lending. For example, since the Fed starting increasing their rates in December 2016, mortgage lending has increased overall by about 2.5% year over year.
In summary, the real estate market continues to be extremely healthy, whether you’re a buyer or a seller.
If you’re thinking about buying or selling a home or have any questions, please don’t hesitate to reach out to us by phone or email. We’d be happy to take care of you.
