Rate Hikes Pauses: Who Cares?

Yes in an historic move (not done in the last 18 months anyways) the Federal Reserve Board has decided to halt their consecutive increase in interest rates at their meeting yesterday.

What does this mean for mortgages?

Not much.

What does this mean if you have a home equity loan or any other adjustable short term interest loan?

It means your monthly adjustable payment did not go up as it may have the past 18 months. I have a home equity loan that has gone from $300 a month to almost $700 a month. Yikes. I'd say I am quite interested in the Feds policy decisions.

But what about how this is affecting my business?

People are asking if I am waiting anxiously for good news from the Fed and I try to explain the Fed only affects a small (yet important) fraction of my business population. The larger proportion of my business is driven by the bond market as I've posted in the past. The graph as shown in the Chicago Tribune yesterday was very telling.

It showed the monthly rate increase after 9/11/01 stepping its way up to today's current level. Then it showed mortgage rates, the backbone of my business. Over that same period of time it is quite steady (actually went down to 6 3/8% last week but had a short uptick last night). Rates are incredibly low now. Now they will most likely not return to the level we saw just following the fall of 2001 unless we see another national catastrophe, but we are still experiencing an excellent time to lock in to a long term (30 year) mortgage depending of course on your goals.

The rates rise and fall like the tide but are not showing a steady increase like short term rates (Fed related).

Finally, and I will post a longer blog on this topic later, I think now is a great time to buy (now you smile and say "of course you do, its your business to want people to buy (or sell).

But I am seeing this slowdown in the economy as real opportunity. There are millions of home on the market nationally that are sitting longer and longer since there are less and less buyers. This means prices are dropping and competition is shifting away from a sellers market and towards a buyers market.

This means opportunity for buyers.

In our area, I am hearing it again and again: "The seller is DEFINITELY willing to negotiate" or "Just make us an offer". The desperate pleas are really comical at times and in my opinion strengthen my argument that its a good time to buy. Of course, in some areas in the country you will need to ask if you have reached or are approaching the bottom of that flattening. If pricing still needs to drop then now is not a good time. But in Chicago I am giving a strong BUY recommendation for many parts of the city.

But for now it is good news from the Fed, but not really HUGE news for the mortgage part of our residential real estate business.