The Fed speaketh today but does the housing market really care? Consumers who are following the Fed moves or are paying attention to what the pundits are saying may be following just a little tootrusting your partners closely. Here’s the skinny on Fed actions- mortgage rates don’t like surprises and rarely react to what the Fed does. Investors who buy and sell mortgage bonds like to be ahead of the curve and if markets think there will be a rate increase by the Fed, then the price of mortgage bonds will fall, causing mortgage rate to rise.

 

Take for example one year ago. The economy had begun picking up a little steam and the Fed hadn’t raised interest rates in nearly a decade. Then, the Fed made a 0.25% adjustment right before the end of the year. Yet mortgage rates really didn’t respond to the rate increase but instead made adjustments to the likelihood of further Fed moves. That caused rates to rise over the next few weeks into February of 2016. But the economy began to sputter and rates began to fall. While rates aren’t at the record lows hit in November of 2012 they’re pretty close. And lower than what they were when the Fed made their December 2015 move.

That’s why regardless of what the Fed does today will most likely not have very much impact in the housing industry. However, should there be a string of economic reports that tell the Fed the economy is back on the mend in a good way the Fed will also like to be ahead- ahead of inflation. When the economy proves it’s starting to roll, investors will anticipate another rate increase. But for now, we can expect financing costs to remain relatively stable. We’ll see.