The Fed Delivers a Hike and a Message – Bloomberg View

 

Janet Yellen was right on schedule this week as the Federal Reserve raised the Prime Rate a quarter point.  What was noteworthy was the immediate response from the bond market and stock market which both rallied on the news.  Why that happens is because financial markets have known for many weeks that the rate hike was coming so the rate hike was already priced into the markets.  In fact mortgage rates actually went down a bit which is contrary to what the public would expect. Remember when the Fed raises rates the immediate impact is on short term rates while long term mortgage rates are directly influenced by the bond market which like the stock market is subject to a myriad of economic and world events.  Keep in mind that the Fed is planning on raising the prime rate again later this year and the timing of future rate increases may be determined by just how successful Trump is in getting his pro growth agenda through congress.  For a detailed analysis see the article below.

Source: The Fed Delivers a Hike and a Message – Bloomberg View

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Markets betting on near-zero interest rates for another decade | Business | Reuters

Going into this year the expectation was  interest rates rising in response to the Fed’s policy of hiking it’s benchmark rates. That talk has all but disappeared as new deflation concerns have brought about discussions of banks now implementing negative rates for their accounts. If that trend continues mortgage rates should remain low for the foreseeable future….perhaps for years to come. See article below.

LONDOTraders work on the floor of the New York Stock Exchange (NYSE) February 24, 2016. REUTERS/Brendan McDermidN (Reuters) – World markets may have recovered their poise from a torrid start to the year, but their outlook for global growth and inflation is now so bleak they are betting on developed world interest

Source: Markets betting on near-zero interest rates for another decade | Business | Reuters

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The Fed and Wall Street Differ on How High Rates Will Go – Bloomberg Business

Source: The Fed and Wall Street Differ on How High Rates Will Go – Bloomberg Business

As most everyone one knows the Fed this last week raised rates for the first time since 2006. If you are in the Keynesian economic camp you may be hesitant to embrace this change, but if you are in the  Monetarist economic camp you are thinking it is about time.  Of course for most of us who do not follow the latest economic theories we are primarily wondering how this will affect home values and stock portfolios. It is important to understand that this change is not a one time event and does not happen in a vacuum of a narrow time frame. The changes will take place over the months ahead as the Fed considers future increases. Many factors went into the decision to raise rates but the overriding factor was a belief that the economy was stable enough to begin the road back to a somewhat normal interest rate structure that would ensure a stable dollar.  How that plays out is where the debate really intensifies and as you can imagine there is no shortage of opinions.  The Fed and Wall St actually see the markets from different prism’s and depending on how events unfold it will be interesting to see who is right. For an interesting read on the tension between the Fed and Wall St click the attached link.

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CoreLogic US Home Price Report Shows Home Prices Up 6.4 Percent Year Over Year

CoreLogic released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ data for September 2015 which shows home prices are up both year over year and month over month.

Source: CoreLogic US Home Price Report Shows Home Prices Up 6.4 Percent Year Over Year

Paul Gusiff Century 21 WestworldAnother year of increasing values in real estate. The market benefited from low interest rates and limited inventory.  With interest rates possible rising later this year it will be interesting to see how the market responds going into 2016.

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MBA: Housing demand to surge over next 10 years

If trends hold over the next 10 years, the next decade will see an unprecedented surge in the demand for housing. Millennials, Boomers and Hispanics will be the drivers if 2014 trends hold. This is big, so read on.

Source: MBA: Housing demand to surge over next 10 years | 2015-08-25 | HousingWire

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