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Housing, The Fed and Interest Rates, Oh My!

December 16, 2016

On Wednesday December 14, 2016, for only the second time in eight years, the Federal Reserve raised its interest rate.


What does that mean?

Well, obviously we all know what an interest rate is and we know that all other interest rates are based off the Federal Reserve's rate, so we can extrapolate from there that when the Fed raises their "benchmark" then other rates rise as well.

Is that a good thing or a bad thing?

Well, both. Or neither?

Let's stick with both, but with the balance leaning toward the good.

When the Fed raises their rate, it is a sign of a growing economy. Additionally, in this case, there is an anticipation of the incoming administration pushing economic and business growth. With this in mind, the Federal Reserve raised the rate, so things wouldn't grow too fast and make the economy unstable.

Growing economy? Good thing! Business growth? Good thing! Stable economy? Great thing!

Rising interest rates? Let's call that a mixed blessing.

A rising interest rate means buyers will pay more monthly. But it also means that as fewer buyers enter the market because of that, mortgage brokers will relax some of their more stringent requirements for buyers, opening up the market to those who had been shut out before. It also means an increase in inventory.

So, what's the final takeaway? Take the right steps, and it's all good.

If you're fully qualified and you've been putting off purchasing a home, now is the time. Go find your perfect home before interest rates rise across the board (and don't forget to search HUDhomestore.com for that perfect home). If you've been working on credit repair or other things to help you qualify, keep working and know that your perfect time to buy is right around the corner.

For more information on the Federal Reserve raising their interest rate, read here, here or here.

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