Fed Rates and Housing Sales

Fed Surprises and Holds Interest Rates

The Federal Reserve defied expectations last week and left interest rates unchanged.  The decision boosted the value of the dollar in the international markets.

Still, there is an impending raise in rates before the end of the year.  The majority of analysts still believe that the rate will be bumped by a quarter of a percent at the Fed’s December meeting.

New economic projections released after the Fed’s two-day policy meeting showed 11 of 16 officials see the “appropriate” level for the federal funds rate, the central bank’s benchmark interest rate, to be in a range between 1.25 percent and 1.50 percent by the end of 2017, or 0.25 percentage points above the current level.
— Reuters

Low rates still abound, and are great for the market. And expectations of rate increases is always a good motivator to get people into the real estate or loan market before they are charged a higher rate.

The kicker that we are seeing right now, as that in the short term, housing sales have taken a hit. It is a small percentage, so it is nothing to panic about, but low housing inventory is leading to rising prices. Whether this motivates potential buyers to pull the trigger before prices get higher, or if it causes people to hold off on purchases remains to be seen. But, consider this:

Homes are also selling quickly because of the lack of options for buyers. The average number of days on the market was 30 in August, down from 36 a year ago.
— USA Today

Optimism for the housing markets in 2018 is higher, as a larger influx of newly constructed homes are expected to hit the market and raise inventory levels. Which will hopefully increase sales and increase work for notaries.

There has been a lack of newly built homes in the last decade since the crash. With new home construction up, we are finally seeing concrete (or wood) evidence that developers and their investors are confident in a growing marketplace for home buyers.

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