On June 14th, the Federal Reserve increased its federal funds interest rate by a quarter of a percent.
The Fed is also widely expected to raise rates once or twice more over the course of 2017.
And while any action by the Fed always garners a lot of attention, I believe these increases will not have any significant impact on the real estate market. Here's why.
First, mortgage rates have actually trended lower in the wake of the Fed's recent announcement.
The 30-year mortgage rate recently hit 3.9%, the lowest level in 2017.
In fact, it's a common pattern for the mortgage rate and the Fed rate to move in opposite directions, and the same thing has happened the last two times the Fed raised rates.
Second, the economy continues to do well.
The Fed decided to increase its rate because unemployment and inflation are low, household spending is picking up, and we've seen steady growth for the past nine years.
This is all good news for the real estate market. And, as expected, we continue to see strong demand and a corresponding increase in home prices.
Third, while the Fed's rate increase is normally meant to cool off the economy, it might actually stimulate it in this case.
Because interest rates were so low for such a long time, experts believe the recent increases might ease pressure on the financial system and encourage lending.
Here's a key statistic that supports this view. Since the Fed started raising its rate in December 2016, total mortgages are up 2.5% year over year.
In conclusion, while any move by the Fed is likely to lead to a lot of hand wringing, I believe the real estate market will not be affected, and will continue on its own healthy course.
Nonetheless, it is clear that right now is a uniquely good moment for everyone in the real estate market.
Today’s low mortgage rates are good for homebuyers because they make homes more affordable.
At the same time, if you are thinking of selling, then the current price levels and tight supply mean you will be able to sell quickly and for top dollar.
To get an idea of what your home is worth in the current market, please don't hesitate to get in touch with me. And if you have any questions about the Twin Cities real estate market, whether you're buying or selling, give me a call/txt at 612-701-5335. or email me at: Tim@TimLRamey.com I’d love to help.
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