A recent press release from the Federal Open Market Committee sent mortgage interest rates on a nosedive and the stock market into one of the biggest climbs in weeks. In short, it was a cheerful moment for investors and buyers of real estate, even though big-shot bond traders worried the sky might be falling.
As usual the press release was filled with economic jargon and a lot of overblown, obscure language that would require interpretation from an academic holed away in an ivory tower to be fully understandable. Luckily I have become accustomed to reading updates from the Fed as I’ve worked in the mortgage industry for the past 16 years, and I have been fortunate to develop a network of colleagues.
My colleagues and I share a common goal of providing our clients with the best possible service, which occasionally means helping each other decipher press releases from the Fed. Here are the important points to remember from its latest, in plain language:
- The Fed likes that employment levels have improved, but it worries about how things are going in the housing sector. People just aren’t building new homes as fast as the Fed would like.
- The Fed has rising prices and inflation on its wish list. It is worried that, since prices aren’t rising, people will put off buying stuff because they think it might not cost them as much in the future – or at the very least it won’t end up costing them a lot more.
- The Fed is unlikely to move short-term interest rates higher at its meeting in April. The big concern prior to the issuance of this press release was that the Fed would remove the word ‘patient’ from its communications. Guess what? The Fed did remove it and the world promptly came to an end, for bond traders anyway. Everyone else had cause for celebration, especially buyers of real estate.
- The Fed is essentially saying that, “We are not quite sure when we will raise short-term interest rates, but don’t worry, when we do decide to move the rates, we promise not to go nuts and we will do so in a calm, stable manner, so don’t freak out, OK?”
To summarize, the news from the Federal Reserve was extremely positive for anyone who is in the market for his or her first home or who might be considering purchasing a larger one. Interest rates are still hovering near all-time lows and it appears that will continue, at least in the short-term. Of course, anyone shopping for a home should meet with a qualified mortgage broker before starting a home search to minimize inefficiencies and begin the process in the most informed, educated way possible.
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Patrick Stoy has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.