Wednesday’s Fed meeting on interest rates brings good news for first-time homebuyers, real estate investors, as well as current property owners.
Fed Interest Rates Left Unchanged
This week, the Federal Reserve announced that it would keep interest rates steady. The strength of the US economy is a major reason for this decision, as the central bank believes it’s growing at a moderate rate. Overall, the outlook is positive with a strong labor market supported by consumer spending and a low inflation rate (below 2%). The Fed interest rate is currently in the range of 1.5% – 1.75%.
Fed Chairman Jerome Powell commented on the decision of the committee:
We believe the current stance of monetary policy is appropriate to support sustained economic growth, a strong labor market, and inflation returning to our symmetric 2% objective. As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate.
Powell also revealed that the call was made in part due to the outbreak of the coronavirus:
It’s a serious issue. There is likely to be some disruption of activity in China and probably globally. We’ll just have to wait to see what the effect is globally.
What This Means for Owners and Buyers in the US Housing Market 2020
Although mortgage interest rates differ from Fed interest rates, they are indirectly impacted whenever the committee makes a significant change. Current mortgage interest rates have dropped significantly already compared to this time last year. According to Bankrate.com, the average 30-year fixed rate is 3.77% compared to 4.9% the same time last year.
As such, now is a good time to refinance your investment property if you made the purchase in previous years when mortgage interest rates were higher. In fact, refinancing can help save an average of $150 for a US homeowner. And while interest rates are slightly higher for real estate investors, you can still take advantage of the lower rates. Property owners are already giving the refinance market a boost as refinancing applications jumped 8% this week, an increase of 146% compared to the same time last year.
If you have an adjustable-rate mortgage, then your monthly payments will remain unchanged for the time being.
And if you’re looking to start investing in real estate, then now would be a good time to buy a house for investment in the US housing market 2020. This week, mortgage applications have already risen 5%, which is an increase of 17% from one year ago.
Although some experts predict that Fed interest rates will not rise much throughout the year, the mortgage interest rate forecast is still unclear. So it’s best to take advantage now and lock in a more affordable interest rate on an investment property mortgage. And as housing demand in the US is increasing now at a time in the market when things tend to slow down, it looks like the spring real estate market may be hotter than usual. With inventory shortages still posing an issue in many major real estate markets, it’s best to make a move now before things heat up anymore.
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