This week will see the Federal Open Market Committee meeting on Dec. 15th and 16th. The most anticipated topic that they will cover will be whether to raise interest rates. Reuters recently reported that Federal Reserve Chair, Janet Yellen, “opened a Congressional committee hearing on the U.S. economy with an upbeat assessment of where the country stands as the Fed marches towards its first interest rate hike in a decade.” She has also previously indicated that a hike was possible.
Retirement funds are one area of concern that has people worrying about the possible effects of an interest rate hike. While one hike probably won’t do much, if rates continue to climb seven to eight times in the next 3-4 years, people will begin to notice it in their wallets and in their investments, according to a recent CNBC article. They’ve also indicated a need to begin factoring in inflation with investments as another result of an interest hike.
But what does an interest rate hike mean for housing?
The housing market has recovered from its own bubble burst on historically low interest rates for almost a decade now. This coming hike will be the first in a very, very long time, with a 0.25% hike expected from most analysts. Selma Hepp, chief economist for Trulia, has said that any increase in rates would be gradual and nominal, according to Housingwire. Such a hike would only raise mortgage payments on a $250,000 home by about $35. She adds that economic uncertainty should keep rates low for quite some time.
“Long term, interest rates may slow home price appreciation but I don’t think it will have a notable impact on home sales,” said Hepp.
The decision will be widely reported on as it is made this week. Stay tuned to your national news outlets for developments.