June 14, 2017
Overview of Fed Rate Hike:
- The Federal Reserve today raised its benchmark interest rate for a second time this year to between 1% and 1.25%, according to MarketWatch.
- The expected 25 basis-point increase follows the last hike, in March, which brought the rate to a range of 0.75% to 1%, up from 0.50% to 0.75%. Another similar increase is expected this year and three more are forecast for 2018.
- The rate increase — the fourth since December 2015 — will likely keep mortgage rates up through the summer, one analyst told HousingWire.
Impact on Mortgage Rates:
An increase in the benchmark interest rate stands to impact mortgage rates, which have been trending down after spiking following the November 2016 election. The average 30-year fixed-mortgage rate was 3.81% this week, up slightly from last week’s 3.75%, according to Bankrate, though that’s down from levels north of 4% in late 2016 and early 2017. (Though those are all lower than pre-recession rates for a 30-year mortgage.)
Whether an uptick in mortgage rates will impact home-buying activity is another story. Zillow noted earlier this year that mortgage rate fluctuations are unlikely to keep people from purchasing or refinancing homes so long as they stay below 5.5%. Conventional, 30-year mortgages are expected to close 2017 around 4.5% and to be above 5% by the end of 2018, according to NerdWallet.
Home-price growth on its own stands to be a stronger determinant of homebuying activity, especially considering the nationwide shortages of entry-level inventory.
Prices rose 1.6% from March to April and were up 6.9% from April 2016, according to CoreLogic. And prices were 1.3% ahead of the 2006 peak in March. Recent data from Trulia puts entry-level housing stock down 8.7% year-over-year during Q1 2017.
Hallie Busta, Construction Dive, @halliebusta