Wednesday, December 16, 2015

The Federal Reserve raised the short-term interest rates today from 0%-0.25% to 0.25%-0/5%.  This was expected by many in the financial world - so it shouldn't come as a shock.

The Fed reduced the rate to 0% in December of 2008 to boost the collapsing housing market.  Home buyers have enjoyed incredibly low rates for almost 8 years.  Federal Reserve Chairman Janet Yellen remarked,"this marks the end of an extraordinary period".  These low rates were designed to spur the economy and get housing sales to move again.  And, it did just that!

Now that we are experiencing a healing economy, it is time for the Fed to make some adjustments. Unemploymnent is at 5%, which is half of what it was in 2009 and incomes are starting to rise.  The Fed watches this closely and has been hinting at an interest rate increase for some time.

The Fed determines the targe rate for very short-term debt, which is the money that they lend to banks.  However, this does influence credit cards, car loans and long-term loans such as mortgages. From this you will see mortgages, bank savings rates and corporate bonds begin to rise.

The current mortgage rate has been around 3.9%.  However, there is no need to panic.  We will not see an overnight change or feel an immediate impact.  Many markets have already priced in the move by the Fed.  30 year mortgages are priced off of 10 year T-note yields - they do rise but not as steep as the short-term rate.

Many experts agree that we will see mortgage rates remain low for some time, with only gradual increases through 2016.  It is possible that we could see interest rates next year slightly over 4%. This is still phenomenal as 10 years ago mortgage rates were 6.3% and 20 years ago they were 7.2%.

I have sold Real Estate for over 18 years. I have seen both the highs and lows of interest rates and real estate markets.  People buy and sell when interest is low and they buy and sell when interest is high.  Nationwide, home sales are expected be 5.7 million this year, compared to 5.4 million in 2014 and 4.6 million in 2011. It is still a great time to buy or sell a home.

What does this mean to me if I am buying now?  On a home purchase of $225k - you may see about a $26 increase in your payment.  This is usually not a deal killer.

There is no need to rush - but it is very important to be working with a knowledgeable Realtor and lender.  A team of professionals is key to getting not only the best home, but the best deal and the best loan.  You need the best negotiators working for you.  Pay attention and rely on your team to advise you.

Want more information on what this interest rate hike mean to you?  GET IT HERE

You can contact me for all of your Real Estate needs at 775-762-7653 or Visit my Real Estate website at

Best Regards,

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