2018, the Fed, and Rates

I sure wish I had a crystal ball to help me predict which way or how much the markets will move in 2018. What I can do is give you a picture of some current factors that are moving rates right now and how they affect those of us in the housing market. In December, the Federal Reserve Board met again and raised the federal fund's rate by .25% (also phrased as "twenty-five basis points"). This is the fifth time they have raised those rates since December 2015. They raise rates in response to factors such as job markets, inflation, and the country's overall economic health. At this time, jobless claims are hitting lows that we have not seen since well before the 2008 market crash. This means that more people are employed and more money is moving through the economy. As you may know, just because the Fed raises their rate does not always translate to a direct hike in mortgage rates. The federal fund's rate is what they charge the banks that borrow from them. This means that non-fixed loans such as lines of credit, credit cards, and some ARMs (adjustable rate mortgages) can be affected immediately, but the long-term mortgage rates generally trend with fixed bond markets. The bond markets that affect housing loans frequently shift when investors move cash out of more volatile stocks and into bonds because they are seeking more conservative, fixed returns. What's interesting about our current outlook is that the US stock market is at historic highs and the bond market prices also remain high-even with a healthy economy. The bottom line for you and me is that 30-year fixed mortgage rates while having gone up somewhat over the last twelve months are still just a little over an average of 4% Going back to 1971, 30-year mortgage rates have never been this low. Stocks are high, bonds are high, and mortgage rates are low. We are currently in a rare financial market sweet spot. This means a couple of things for real estate: 1) With more people back in jobs and mortgage rates low, things should continue to move briskly across the real estate landscape. 2) It is a good time to encourage potential buyers to move ahead with purchasing their first home or upgrading. If you are currently on an adjustable rate loan, now is a good time to consider refinancing into a fixed mortgage. While I can't predict where 2018 will end up in the financial markets, I do know that things are on the rise at this time. I look forward to serving you as a true partner this year. Please feel free to send an email or call me to discuss anything you need.