By Jeremy Hart
As many have noticed, the Federal Reserve raised short-term interest rates on Wednesday, December 16, 2015, for the first-time in nearly a decade, and the response has been, so far, relatively mild.
The Federal Reserve is the central bank for the United States, and as such it manually controls things like interest rates in direct response to how the U.S economy is doing. The Fed has not raised interest rates in quite some time, so the rate hike is a sign that the Reserve feels good about where the economy is, and where it is heading.
It’s important to note, however, that the recent rate hike is NOT doom and gloom. In fact, when it comes to the housing sector, the rate hike is actually good news, because it means that the central bank sees housing as being able to stand on it’s own two feet going forward, and not needing to be propped up by artificially low interest rates. One could argue that housing has been improving over the last several years *despite* low interest rates, as job growth numbers have climbed, and consumer confidence has held—if people feel good about their job security, they tend to buy things (like houses, or cars, or appliances).
Some have been saying that the rate hike will lead to a housing market that will see interest rates screaming upwards, but I’m betting that we’ll see nothing of the sort. Will we see small increases? Sure, but nothing that will dissuade the average buyer from purchasing a home. Consider this—a $200,000, 30-year conventional loan at 3.75% has a principal and interest payment of $926.23, whereas the same loan at a 4% rate has a principal and interest payment of $954.83. The difference of $28.60 per month isn’t likely going to keep most buyers nationwide from purchasing a home in the foreseeable future.
Does a rate hike cost money? Yes. But it’s also a sign of progress and improvement; as with anything, slow and steady ALWAYS wins the race.
If you have questions, or want to talk more about how the rate hike might affect you, don’t hesitate to reach out to any of our Nest Agents.
Jeremy Hart is the Managing Broker of Nest Realty, New River Valley, and the 2014 NRVAR REALTOR of the Year. His interest are as varied as his expertise. Whether you just need to buy or sell home, or you want to learn more about your new community and how to get involved—give Jeremy a call, send him an email, or better yet, just stop him as you see him around town and say hi!