Question: Should We Worry About the Fed Raising Interest Rates?
The Fed Reserve has been warning for years it plans to raise interest rates, but never follows through on the plan. It gets scared because the economy doesn’t look good, and then backs off. The Fed warned yesterday that it could raise rates in June. Just the warning could send folks running to brokers to refinance (again) or buy…
The Fed Reserve has been warning for years it plans to raise interest rates, but never follows through on the plan. It gets scared because the economy doesn’t look good, and then backs off. The Fed warned yesterday that it could raise rates in June.
Just the warning could send folks running to brokers to refinance (again) or buy something asap. If the Fed were really to do it, it could depress home prices — or more.
Should we take it seriously this time?
Housing prices may be depressed from historic highs? Fine with me.
Interest rates are likely to remain near lows even if the US raises rates in the near-term because of global deflationary pressures.
The real question is will ex-US buyer continue to buy in BK as their currency has collapsed in the past few months (the currency markets are pricing in a Fed rates move). More specifically, will Australian funds that have bought up much of the Bed-Sty inventory over the past 4 years continue to buy after their currency has depreciated ~25% in the past 6 months. What is the impact to bed-sty prices if the start selling or just simply stop buying? Usually markets are at top when the biggest buyers stop buying.
http://www.bkmag.com/2013/11/20/everything-is-fucked-over-70-of-new-brooklyn-home-sales-are-by-bankers-and-foreign-investors/
http://www.brooklyneagle.com/articles/2014/8/6/boy-oz-alan-dixon-buys-bed-stuy-brownstones-australian-fund
These are currently historically low rates.
Interest paid on home mortgages is still one of the only income tax deductions ordinary working people get.
And in prior cycles; raising interest rates has increased prices because it creates a “buy now” race before interest get too high.
Also as interest rates rise, Banks will put more money into the mortgage business, making mortgages easier to get for more people.