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Housing Can Withstand Rate Rise

By Steve Matthews

Tuesday, December 1st, 2015

The U.S. Federal Reserve isn’t exactly poised to crash the house party.

Low interest rates, steady job gains and improving household finances have helped bolster the housing recovery. And even as 2015’s strong first half has given way to some wobbly months of late, housing fundamentals appear primed to withstand a looming U.S. rate increase.

Minutes released from the October FOMC meeting stated “most participants” agreed conditions would be right—or already were right—to consider an increase to the benchmark Fed Funds Rate at their meeting December 15 and 16. This rate, which is the rate banks use to lend money to other banks overnight, has been near zero for nearly a decade.

According to the Wall Street Journal, investors and economists are currently predicting a 74 percent chance of an increase to the Fed Funds Rate this month, though this figure could change based on upcoming economic reports. When the Fed Funds Rate does change, other consumer rates—like home loan rates—might follow, depending on other market and economic conditions.

Higher rates are coming, perhaps in a few weeks. Don’t expect them to take an immediate toll on housing.

If you or someone you know has questions about the housing market or home loans, please don’t hesitate to contact me. Home loan rates remain attractive, allowing for great purchase and refinance opportunities.