Real Estate Center Chief Economist: Fed Interest Rate Increase Could Be Good

The Federal Reserve raised a key interest rate by 0.25 percent recently, and Real Estate Center Chief Economist Dr. James Gaines said this increase could have positive impacts on certain markets.

Gaines said one immediate result could be an increase in housing demand as buyers seek to take advantage of interest rates before they increase further. While the recent interest rate increase is only the second in a decade, the last taking place in December 2015, three more increases are forecast for 2017.

“People who are on the fence about buying a home might anticipate rates, as well as prices, going up in the next six to 12 months. This might give them the push they need to buy now,” said Gaines.

Mortgage rates for a 30-year, fixed-rate mortgage are at about 4.3 percent. This is up from a low of 3.3 percent, which was reached during the past year. “We expect to see more,” he said. “The expectations in the market for the coming year are that interest rates will trend upward. At what rate, though, we’re not sure.”

Gaines also likened the rate increase to “somewhat good news” for investors. “People who count on interest return on investments and retirement savings and so forth have been getting virtually no interest at all on their savings for the past six or seven years. In the coming year, they might see some slight increases in interest rates on things like bank savings rates and certificates, and deposits.”

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