The Federal Reserve’s Open Market Committee today reversed its course of slashing its target for the federal funds rate and instead raised the target by a 25 basis points to 1.25 percent.

The widely anticipated move drew little outward worry from the real estate community, despite talk of a housing bubble. Although the Fed’s target rate does not directly impact mortgage rates, it has an indirect effect and the ultra-accommodative 1 percent had fueled the red-hot housing market. But many within the industry see no reason to worry–at least not yet–about a slowing housing market.

“If it slows down to levels of last year, or the year before that or the year before that, we’ll take it. Those were all great years,” said Chappy Adams, president of Illustrated Properties in Palm Beach County, Fla.

In its policy statement, the Fed said it believes “even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.” With underlying inflation still expected to be relatively low, the Fed wrote, policy accommodation “can be removed at a pace that is likely to be measured.”

The federal funds target rate is essentially what banks charge each other overnight. Fixed-rate mortgage rates tend to closely align with the 10-year Treasury bond, which generally reflects what the market is expected to do longer term, as well as any anticipated changes in the federal funds target rate. That means the longer-term Treasury bond has likely already incorporated today’s hike, meaning mortgage rates have likely incorporated it as well.

That’s one reason real estate professionals say they’re not worried about the Fed’s move today.

Mortgage rates have already climbed in the past month in anticipation of the Fed’s move, Adams said, yet the past couple of months have been some of Illustrated Properties’ strongest ever.

“We’re selling more units at a higher price at a higher interest rate than we did five months ago,” Adams said.

Pamela Hanson, broker/owner of Domain Properties, based in Providence, R.I., said she doesn’t worry much about the Fed move because people are always going to need houses no matter the current interest rate. Besides, she said, rates historically are still very low. Anyone who’s been in the business awhile has seen rates in the double digits, Hanson said, so a quarter-point increase shouldn’t cause worry. Even if rates hit 7 percent, that shouldn’t be too alarming.

“I mean, come on, are we being a little greedy?” Hanson said. “It’s not that big of a deal.”

Hanson said she pays attention to Fed meetings only because clients hear about them and then ask her for her thoughts. Other than that, however, she didn’t give today’s Fed meeting much thought. At this point, the recent higher interest rates have had “absolutely little to no impact,” on her business. She doubts small increases in the Fed’s target rate will have much effect either.

“Maybe I should be more concerned, but I’m not,” Hanson said.

Barbara Weinberg, broker/owner of RE/MAX East of the River in Connecticut, said buyers, who tend to be more nervous in general, have been paying attention to the Fed’s actions.

“To some extent, they think, ‘We better buy today rather than tomorrow because who knows what tomorrow will bring,'” Weinberg said.

But Weinberg isn’t worried about today’s rate hike and doesn’t believe it will affect her business much. A series of sustained hikes by the Fed would concern her, however. A second rate hike this year, she said, would signal that rates definitely will be moving in the opposite direction than they have been for the past couple years, and that would impact her business.

Until that happens, Weinberg is content not to worry about today’s decision. She said most people are afraid to hazard a guess as to what will happen with the economy over the remainder of the year and whether those developments will actually cause the Fed to further raise rates.

Charles Hershson, president of Fidelity Mortgage Lenders and president of California Mortgage Association, said a quarter-point increase at this point is more psychological than anything else for consumers. An increase of that size won’t stop a sale or a refinance, but “it’s definitely putting people on notice. The game of low interest rates is over.”

“I consider this time the twilight zone,” Hershson said. “Nobody really knows where everything is going right now. We’re sort of in limbo.”

Corey Reid, president of Fountainhead Mortgage in Emeryville, Calif., said he paid attention to the Fed meeting, but believes mortgage rates had already adjusted for today’s hike. But, he said, if the Fed keeps raising rates, as they’re expected to do, that could impact business.

For Adams, however, “Things are so good, I don’t know what it’s going to take to really slow the market down. That’s anybody’s guess.”

Some industry professionals have estimated it would take mortgage rates nearing 7 percent or 8 percent to seriously slow down the market.

Still, others say, an improving economy provides mitigating factors for any future Fed rate hikes.

“One thing I’ve learned is that jobs are way more important than interest rates,” said Mark Prather, president of Mark 1 Mortgage in Southern California. “Give me a great job market and lousy rates, I’ll take that over great rates and a lousy job market any day.”


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