The immediate news is the Federal Reserve increased its overnight Fed Funds Rate .75% to 1.5-1.75%. The ongoing high inflation levels pushed them to move higher than the originally conveyed .5% increase. The bigger news is the end of 2022 rate forecast is up from 1.9% to 3.4%. That’s a substantial move, but the Fed has been way behind on easing the artificially low rates fighting off the Pandemic closings.
30 Year Fixed Mortgage rates have already gone up 3% since the beginning of the year. The Fed Funds Rate will only directly affect Adjustable Rate Mortgages and Home Equity Lines of Credit, as their indexes (like the Prime)will adjust with every Fed move.
*Blog to be continued after the Fed Chair Powell gives his news conference.
During the press conference Chairman Powell acknowledged the following points:
1) The Fed is using consumer spending as a primary indicator of the economy. That the primary area the Fed can affect by increasing the Fed Funds Rate
2) By law they have to fight Headline Inflation which is at 8.6%, but they really only are targeting the Core rate which excludes food, shelter, energy and used cars, which is running lower at 6.0%
3) They can’t control elements like commodity or oil prices, or supply chain issues
4) He and the Fed will be aggressive on fighting inflation, and will not try and cause a Recession, but it may be a result
5) Financial conditions have tightened. He’s aware of how the higher mortgage rates is affecting the housing market. Interesting that he indicted First Time Buyers may want to rethink their purchasing timeline
6) Powell is willing to increase the UnEmployment level to fight inflation. Presently unemployment is at 3.6%. He thinks having unemployment at 4.1% and inflation at 2% would be a win.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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