Janet Yellen’s final meeting as Fed Chair was last week. The Fed decided not to raise rates. Jerome Powell assumes the position on February 3d. Expect a rate hike in March and probably 3 more in 2018. The days of cheap money are coming to an end!
Today, if you’re borrowing to finance the purchase a single family residence from a commercial bank, you can lock in an interest rate (15 year fixed) of 3.387% or refinance at 3.51%. Want a home equity loan (HELOC)? 3%, which is up .79 from a year ago. Hard money for “flips” is still at 8.5%. These rates are very attractive, with market values increasing 8% to 10% per year.
Why will the Fed increase rates, which will cause banks to increase borrowing costs? Remember – Low rates resulted from the Fed’s decision to stimulate the economy by dropping the Fed Funds rate to 0% in 2007-2008.
Today, the gains in employment are at 17 year lows – 4.1%. Household spending and capital investment are anticipated to increase because of the recent tax cuts. Therefore, labor markets will get stronger and the economy will expand. So, the enemy is inflation – check that by increasing interest rates.
Our advice is to lock in interest rates in the next 60-90 days.
7/22/2022 01:04:21 pm
Grateful ffor sharing this
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A majority of the articles are written by real estate experts Bill Chadwick and Brenda Hayward.