M A D I S O N , M I S S I S S I P P I
We got a few words about the crazy housing market from the brilliant Michelle Dugan, owner and Mortgage Broker for MS Lending:
Recently, the Fed hiked the Fed Funds Rate by 0.75%. This was the third rate hike of the year and the Fed also projects hiking another 1.75% over the four meetings that remain this year.
Remember, the Fed Funds Rate is the overnight borrowing rate for banks and it is not the same as mortgage rates.
But you may be wondering: How does this move in the Fed Funds Rate affect mortgage rates?
Mortgage rates are primarily driven by inflation, which is at a 41-year high. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation. If the Fed is successful in cooling inflation, mortgage rates should decline. History proves this during rate hike cycles for the past 50 years.
The media has been sounding the alarms on a potential recession this year, which has many questioning if it’s a good time to purchase a home. When people hear about recessions, most remember the sharp decline in home prices during the housing bubble and 2009 recession. Many often mistakenly believe that the recession caused the housing bubble, but it was quite the opposite – the housing bubble led the U.S. into a recession.
Looking back at the other eight recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods.
During the housing bubble, risky, non-verified mortgages were commonplace. There was a glut of supply in the real estate market along with much lower buyer demand. Today’s housing market is much stronger – there are 3 million fewer homes for sale compared to the housing bubble, and 14 million more households. Strong demand and tight supply should continue to be supportive of home prices.
If you are looking for information on how to navigate the uncertainty of today’s market or looking to buy or refinance, please don’t hesitate to reach out.
Recently, the Fed hiked the Fed Funds Rate by 0.75%. This was the third rate hike of the year and the Fed also projects hiking another 1.75% over the four meetings that remain this year.
Remember, the Fed Funds Rate is the overnight borrowing rate for banks and it is not the same as mortgage rates.
But you may be wondering: How does this move in the Fed Funds Rate affect mortgage rates?
Mortgage rates are primarily driven by inflation, which is at a 41-year high. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation. If the Fed is successful in cooling inflation, mortgage rates should decline. History proves this during rate hike cycles for the past 50 years.
The media has been sounding the alarms on a potential recession this year, which has many questioning if it’s a good time to purchase a home. When people hear about recessions, most remember the sharp decline in home prices during the housing bubble and 2009 recession. Many often mistakenly believe that the recession caused the housing bubble, but it was quite the opposite – the housing bubble led the U.S. into a recession.
Looking back at the other eight recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods.
During the housing bubble, risky, non-verified mortgages were commonplace. There was a glut of supply in the real estate market along with much lower buyer demand. Today’s housing market is much stronger – there are 3 million fewer homes for sale compared to the housing bubble, and 14 million more households. Strong demand and tight supply should continue to be supportive of home prices.
If you are looking for information on how to navigate the uncertainty of today’s market or looking to buy or refinance, please don’t hesitate to reach out.
RSS Feed