The start of a new year is a great time to reflect on the prior year and the markets that often matter most to homeowners and potential buyers. For several years, mortgage rates remained very low, and home prices climbed steadily. 2018 saw a moderation of those trends as rates began to rise. Home prices still grew, just not as quickly. Homeowners stayed put, so the inventory of homes for sale was tight. Rates have since fallen back and have already triggered increased mortgage activity. The combination of continued inventory shortages and lower rates may also keep a solid floor under home prices as the spring market develops. Outside of home financing trends, good economic news and market uncertainty are setting the stage for the new year. Wage growth and very low unemployment could lead to more inflation, which has historically pushed rates higher. However, global economic pressures and political tensions could sustain the recent volatility in stocks and in turn, help to keep rates low. All in all, 2019 is set to take the markets on an interesting ride. During the year, if you or someone you know is ready to buy, sell or refinance, please reach out or pass along my contact information. I’m always happy to talk about what’s happening and the opportunities that may exist.
As expected, and going against the wishes of some, the Fed increased policy rates by a quarter percent at their December meeting. This is the fourth hike this year and the ninth since 2015. Previously, the benchmark rate was kept at a record low for seven years.
Remind me—who is the Fed?
The Federal Reserve Board (the Fed), controls the Fed Fund Rate and the Discount Rate. These are charges for overnight loans from bank to bank or from the Fed to member banks.
What does an increase mean for regular people?
• It could cause banks to increase their “prime rates,” which are often used to calculate interest on consumer products like credit cards, private student loans, and home equity lines of credit (HELOCs). Adjustable Rate Mortgages (ARMs) may be directly impacted as well.
• Fixed mortgages are typically based on long-term rates, which are not directly affected by Fed rate changes. However, Fed policy does influence mortgage rates, which can rise in anticipation of future Fed action. There are exceptions, yet home loan rates will typically follow overall interest rate trends over time.
Here's something new:
Officials initially projected three additional Fed rate hikes for 2019, but that number dropped to two. Fed members say they will continue monitoring economic data to make future decisions.
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