This week the Federal Reserve announced the first rate hike in nine years. Interest rate increases are often misunderstood with varied reactions by consumers. One reaction is to buy quickly before the rate rises again. Another is to hold off on buying completely. The actual impact of the Federal Reserve decision is less than perceived by the public, as it affects home mortgages.
According to Marcy Moore with Lending Partners in the Preston Hollow/Park Cities office, "The 1/4% rate change by the Fed did not affect mortgages at all. It did nothing but create a big "yawn". The mortgage industry has been factoring in this rate hike for months. Mortgage rates are set by Wall Street through mortgage backed securities, aka the bond market. Mortgage rates are currently stable and if they raise even the slightest, is is because of our strong real estate market and values."
Interest rates go up when the economy is growing. This matters more to homes sales and prices. A strong economy, even with a bump in the interest rate, means a healthy housing market. The option to those not buying is to rent and rental rates are higher than ever, with a correction not expected for two years.
Mark Fleming, chief economist at First American, says the modest increase is good for the health of the housing market.
"For the first time since before the iPhone, the Federal Reserve has done it - raised the Federal Funds target rate by a modest quarter percent. This increase can actually be a good thing for the long-term health of the housing market. We are finally embarking on a path of rate normalization that will slow price appreciation and implies faster income growth, ending an era of leverage-assisted asset inflation, which is hampering affordability and undermining the housing market."
"A Fed rate increase may grab people's attention, yet the cost of borrowing money to buy a home remains historically low by all measurements. From our perspective, mortgage rates will remain low for years to come, and that's good for consumers and the real estate market."
If you are in the market to buy, don't give up. A good relationship with a local Realtor AND a local Mortgage Officer will guide you through the complexities of buying and selling.
Hanne Sagalowsky / email@example.com / 214-402-8200 / International Property Specialist