On Thursday outgoing Federal Reserve Chairwoman Janet Yellen announced a modest benchmark interest rate increase to 1.25%-1.50%, a move widely perceived as a reflection of confidence in the economy. Here are some reactions from the real estate industry to the news.

National Association of Realtors Chief Economist Lawrence Yun

“There will be juice added to the economy in the months ahead as a result of the expected passage of a massive tax cut. It remains to be seen whether the effects are long-lasting or just for a short period of time.

“However, with the unemployment rate already at a low of around 4 percent, there is not much room to go further down. That means inflationary pressure will slowly develop. That is why the Federal Reserve today raised the short-term interest rates and will likely do so three more times in 2018. The longer-term interest rates, like the 30-year fixed mortgages rate, will therefore be nudged higher in 2018. Economic stimulus will help with job creation and housing demand, but higher interest rates threaten to cut into housing affordability in 2018.”


“Even though the Federal Open Market Committee has decided to raise its benchmark, short-term interest rate target to its highest level in nine years, don’t expect mortgage rates to rise much. This move has been widely anticipated for several weeks, and the hike was largely priced into markets already. Additionally, a lot of faces will change at the Federal Reserve beginning in 2018 – including a new Chair and a new slate of FOMC voters – so markets will probably place less emphasis than usual on today’s news.

“Over the past year, long-term interest rates have not increased nearly as much as short-term interest rates. Such low long-term lending rates are a historic anomaly and have buoyed home values by giving buyers more budget flexibility at a time when the overall economy – and especially the labor market – is so strong. Low mortgage rates have largely kept affordability in check even as home prices have risen, and have helped spur high demand in the face of persistently low inventory, which has pushed recent home value appreciation well beyond what many housing economists had initially forecasted. But low mortgage rates can’t last forever. Though they may not approach historic highs any time soon, sooner or later they will increase, eating into what buyers can afford to pay. Zillow expects mortgage rates to end 2018 around 4.5 percent – roughly 75 basis points higher than their current levels.”

We’ll add more as comments roll in.

Realtor.com economist Joe Kirchner

“Despite meager inflation growth, the Federal Reserve decided to raise rates .25 percent which is likely attributed to future inflation concerns over: a tightening labor market, limited labor productivity growth, and the Congressional Budget Office projecting large deficits due to the Republican tax plan.

Today’s decision will likely push 30-year fixed mortgage rates past the 4 percent mark in the coming weeks. Despite decreasing affordability in an already pricey housing market, higher interest rates might have a silver lining for first-time and low-income buyers looking to enter the market. Today’s increase is likely the first of a series in 2018, which could ultimately make it more difficult for financial institutions to sell mortgages and prompt a loosening of qualifying standards. With mortgage qualification being one of the largest barriers to ownership, homeownership may get easier for these groups in 2018.”

Keller Williams economist Ruben Gonzalez

“We expect mortgage rates to remain affordable and to slowly rise in the near term given the anticipated path of Federal Reserve policy and growth.”


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