{"id":2223,"date":"2015-12-22T12:17:31","date_gmt":"2015-12-22T16:17:31","guid":{"rendered":"http:\/\/dankrell.com\/blog\/?p=2223"},"modified":"2020-10-20T08:38:01","modified_gmt":"2020-10-20T12:38:01","slug":"the-fed-interest-rates-and-the-housing-market","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2015\/12\/22\/the-fed-interest-rates-and-the-housing-market\/","title":{"rendered":"The Fed, interest rates, and the housing market"},"content":{"rendered":"\n
\"\"\/<\/a>
From Zillow.com<\/figcaption><\/figure><\/div>\n\n\n\n

After a historic run of over seven years of near zero interest rates, the Fed pulled the trigger to raise the target rate on December 17th<\/sup> to 0.25% – 0.5%. The last time the Fed changed the rate was almost exactly seven years ago on December 16th<\/sup> 2008, when the rate decreased from 1% to near zero. And it\u2019s the first rate increase since June 29th<\/sup> 2006!<\/p>\n\n\n\n

In the midst of what was to become the beginning of the great recession, the Federal Open Market Committee press release\u00a0 from December 16<\/a>th<\/a><\/sup> 2008<\/a> (federalreserve.gov) described the rate change to near zero as a means to, \u201c\u2026promote the resumption of sustainable economic growth and to preserve price stability.\u00a0 In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.\u201d<\/em> And since, housing experts anticipated a Fed rate increase; often predicting how the real estate market would be affected.<\/p>\n\n\n\n

Although a significant move by the Fed, the rate increase is minor and rates continue to be relatively low. And don\u2019t worry, even with last week\u2019s Fed target rate increase last week, it doesn\u2019t mean the that mortgage interest rates automatically increase the same amount. Mortgage rates<\/a> are gauged by bond yields, which usually anticipate and \u201cbake in\u201d any significant news into rates prior to economic announcements.<\/p>\n\n\n\n

\"Real<\/a><\/figure><\/div>\n\n\n\n

Putting rates in perspective, Freddie Mac\u2019s Primary Mortgage Market Survey indicated that the average national 30-year-fixed mortgage rate increased last week slightly from 3.95% to 3.97% (and up from the 3.80% a year ago). Furthermore, Freddie Mac\u2019s Economic and Housing Research Weekly Commentary and Economic Update<\/a> December 17th<\/sup> statement expects a gradual Fed monetary tightening, with a \u201cmodest increase\u201d in long term rates. Additionally, \u201c\u2026Mortgage rates will tick higher but remain at historically low levels in 2016. Home sales will remain strong, but refinance activity should cool somewhat<\/em>\u2026\u201d (freddiemac.com).<\/p>\n\n\n\n

Some say that the Fed\u2019s rate increase is premature, while others say that it may be too late to raise rates; however, many economic experts concur that the economy remains in uncharted waters. Regardless, housing experts agree that the Fed rate increase is good for the real estate market<\/a>.<\/p>\n\n\n\n

The National Association of Realtors\u00ae chief economist, Lawrence Yun stated that mortgage rates should continue to remain relatively low through 2016, saying, \u201c\u2026The raising of short-term rates could be more of a confidence play to the market \u2014 it provides a signal that the economy is strengthening, \u2026 and the lenders believe that, it may actually provide more lending opportunity for the banks\u2026<\/em>\u201d (What the Fed\u2019s Decision Means for Housing<\/em>; realtormag.realtor.org; December 17, 2015).<\/p>\n\n\n\n

Bankrate\u2019s Mark Hamrick pointed out two benefits to the housing market from a rate increase (7 unintended benefits of higher interest rates from the Federal Reserve<\/em><\/a>; bankrate.com; September 11, 2015). The first benefit is increased lending: Banks are incentivized to lend money when rates increase; possibly expanding mortgage lending which could increase the number of qualified home buyers participating in the market. The second benefit is increasing the pool of home buyers: increasing rates could get fence sitters into the market because of rising buyer costs. However, this may be a progressive effect through 2016, as mortgage rates are estimated to gradually increase beyond 4.5% (rising interest rates may also moderate ballooning home prices to prevent another housing bubble<\/a>).<\/p>\n\n\n\n

By Dan Krell
Copyright \u00a9 2015 <\/p>\n\n\n\n

If you like this post, do not copy; instead please:
reference the article<\/a>,
like it at facebook<\/a>
or re-tweet<\/a>.<\/p>\n\n\n\n

\"Protected<\/a><\/figure>\n\n\n\n


Disclaimer<\/a>. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.<\/p>\n","protected":false},"excerpt":{"rendered":"

After a historic run of over seven years of near zero interest rates, the Fed pulled the trigger to raise the target rate on December 17th to 0.25% – 0.5%. The last time the Fed changed the rate was almost exactly seven years ago on December 16th 2008, when the rate decreased from 1% to … <\/p>\n

Continue reading “The Fed, interest rates, and the housing market”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[567,234,86,288,17,13,26],"tags":[966,893,839,466,500,797,593],"class_list":["post-2223","post","type-post","status-publish","format-standard","hentry","category-economics","category-economy","category-federal-reserve","category-housing-market","category-mortgage-interest-rates","category-real-estate","category-real-estate-market","tag-economics","tag-economy","tag-federal-reserve","tag-housing-market-2","tag-interest-rate","tag-real-estate","tag-real-estate-market-2"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-zR","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2223","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=2223"}],"version-history":[{"count":6,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2223\/revisions"}],"predecessor-version":[{"id":6023,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2223\/revisions\/6023"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=2223"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=2223"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=2223"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}