Fed’s Yellen Cites Strong US Growth

Federal Reserve Chairwoman Janet Yellen recently indicated strong US growth is driving inflation, according to Cheng Chen, with TD Securities in New York.

In what may be one of her last public appearances before leaving the Fed early next year, Yellen said a strengthening US economy will warrant continued interest rate increases.

Chen also stated, “Yellen was kind of optimistic about the economy”, with pending home sales rising to a stronger-than-expected 3.5% in October, suggesting a housing sector on a stable path to recovery.

With the next rate increase likely to occur later this month, now would be a great time to consider buying or refinancing a home. I will gladly review your circumstances and provide guidance.

I can be reached at 435-752-1414.

 

Interest Rates Holding – New Construction Vibrant

As the Fed cautiously raises the inter-bank lending rate and positive news flows from the stock market, long term mortgage rates continue to hold steady; which is a good sign for home buyers and sellers.

Builders are very busy with both second and third time buyers building their new home, as well as building spec homes for first time buyers.  The gap of existing homes for sale and the construction of new homes is slowly closing, which will provide increased inventory in the future.

Acting while rates are low, will provide excellent long term benefits.

 

Interest Rates Rise

Last week the Federal Reserve hiked interest rates for the third time, following the financial crisis.  The short-term interest rate rose a quarter point to .75%, a move that will trickle down to the economy.

The Fed signaled this move for weeks, intending to keep the strengthening economy from overheating.  Strong job growth, aggressive stock markets and an uptick in inflation triggered the move.

After the Fed’s initial move in December 2015, they waited a year before doing so again, amid mixed economic data and shaky stock markets.  It appears the Fed is serious about accelerating the pace of rate increases.

With local inventory at an all time low, it is a seller’s market and a great time to consider selling your current home and building a new one.

No Changes To The Fed’s Key Interest Rate

According to the Associated Press, the Federal Reserve left its key interest rate unchanged at a time of solid economic gains, but also increased uncertainty surrounding President Donald Trump’s new administration.

At the same time,  the Fed pointed to improved sentiment among consumers and businesses, but offered no hints about when it will resume raising rates.  Chairwoman Yellen indicated more time was needed to monitor the economy and she still envisions a gradual pace of rate increases.

Many economists think the Fed will put off further rate increases until more is known about Trump’s ambitious agenda or whether his drive to cancel or rewrite trade deals will slow growth or unsettle investors.

Overall, the statement offered a slightly more upbeat tone than it did after the Fed’s previous meeting in December.

Rates are still low and afford the opportunity for buyers  and sellers to act.  Particularly, given home values are currently enjoying a sustainable pace.

 

Happy New Year – The Fed Finally Acted

According to the Wall Street Journal, the Federal Reserve recently bumped up it’s discount rate .25 percent, which was only the second increase in 10 years.  This move comes against a political and market backdrop “drastically different” from when it last issued projections in September, with many analysts anticipating more rapid growth and inflation under President-elect Trump, warranting a faster pace of rate hikes.  Even so, the Fed indicated it still plans to “proceed cautiously”.

Most pundits believe that higher interest rates may be in our future.  But don’t be so sure.  There are no guarantee that Trump’s promises will be fulfilled, especially if Congress has its say.

Either way, we’re entering a new rate environment which has many unknowns.  So, make  your best decisions with the information you know, not what you suspect.

Best Decisions

When you look back, how have you made your best decisions?

For me, my best decisions are always derived when I have the most accurate information available and basing my decision on what I knew, not what I hoped or expected to know.  When my decisions were based on limited information or supposition, the outcome was usually less favorable.

We are currently  in uncharted territory and decisions should be grounded in current knowledge. As you assess future housing needs and wants, consider realistic scenarios, not best-case scenarios and always rely on seasoned professionals.

Will The Federal Reserve Still Raise Rates?

According to Reuters Business News, while there was no prior official view on what the Fed would do if Trump won in a contest where nearly every poll of U.S. voters pointed to a victory for Democrat Hillary Clinton, many had said ensuing uncertainty from an upset might put up a roadblock to the Federal Reserve’s anticipated rate hike.

A Reuters poll showed roughly 85 percent of 62 respondents said the Fed would go ahead with a rate rise, its first in a year.  The consensus view was for three Fed rate rises between now and the end of next year, which would bring the fed funds rate to 1.00-1.25 percent if they move in gradual 25 basis point increments.

A series of rate rises into next year would depend on a continued solid growth path and clear signs of inflationary pressure, particularly through wage gains. But it is not clear that the uncertainty from the vote would necessarily reduce the likelihood of future rate rises.

Fed Chief Janet Yellen, first chosen by current President Barack Obama, is expected to serve the remainder of the 15 months left in her four-year term, the poll found. But respondents said it was not likely Trump would reappoint her.

Rate Hike Likely Later This Year

Fed Chair Janet Yellen said the central bank has no ‘fixed timetable’ for raising interest rates, but she believes the economy is ready for a rate hike by the end of the year.

In a recent appearance before the House Financial Services Committee, she indicated the majority of her colleagues believed it would be appropriate to raise rates prior to the end of this year.

The Fed boosted its key policy rate in December 2015 to a range of 0.25 percent to 0.5 percent. But have left the rate unchanged since then.

Fed Still Cautious About Raising Rates

The summer heat of July has arrived, unlike the interest rate increase the Fed considered in June.  Rate are still very low and sellers are in the driver’s seat, with our inventory of homes also low.  Compared to the past few years, now is the best time to sell we’ve seen in quite some time.

Whether you’re a potential first-time buyer, a homeowner considering refinancing, or someone looking to trade up your house or downsize, rates this low could be worth your attention.  A drop of even half a percentage point can translate into meaningful savings over the life of a 30-year loan.  Lower rates also lower the amount of qualifying income you need to get a loan.

While pundits have declared again and again that mortgage rate have hit rock bottom, only for them to maintain their downward trend, if the economy picks up after another strong jobs report, this time might be different.  Today’s ultra low rates might not return for a while, if ever.

June Rate Increase Still Possible

USA Today’s Paul Davidson writes “Don’t write off a June interest rate hike.”  Notes from last week’s Federal Reserve meeting appear to place ‘a greater  likelihood on a June rate increase’ than expected.

Most analysts had presumed the central bank would hold off raising rates in the face of global economic uncertainty and the possibility that Great Britain will vote to withdraw from the European Union.

However, Fed policymakers say they’ll seriously consider a rate hike if certain conditions are met, like strong hiring or an uptick in inflation.

Now is a great time to sell, as our inventory is low.  Additionally, you can take advantage of lifetime low interest rates.

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