Depending on which side of the fence you were on, the FOMC comments yesterday and inaction on rates were expected. The Fed says there’s no reason to raise rates right now and won’t untilShould You Form an LLC? they get more data on the economy. Which is pretty much what they’ve been saying for the past couple of years now. And as we pointed out yesterday, whatever the Fed did or didn’t do wouldn’t have much of an immediate impact on rates. There are analysts who are warning that when the Fed does raise rates it will hurt stocks with a selloff. The beneficiaries of a hit on Wall Street will be bonds and Treasuries. Mortgage rates should follow suit and fall a bit as a result. That said, mortgage rates are actually lower today than yesterday, opening up the possibility of refinancing investment properties more of a likelihood and a continued ride for better cash flow due to lower rates.

 

Yet the economic data the Fed seems to follow is still very contradictory. Today for example, first-time unemployment claims dropped to a two-month low while existing home sales fell lower than expected even in the face of a tightening inventory. That points to the story that says low rates spur home sales but we’re not sure if that’s always the case. Real estate investors may be spurred to buy but only if the properties cash flow. Those who purchase owner-occupied homes certainly consider rates and shop for the best offering but low rates typically don’t make consumers buy homes. There were plenty of home sales in the 1980s when financing costs had mortgage rates in double digits.

Financing costs for all types of real estate should stay near relative lows at least through the end of this year and into the next. What the Fed will be taking a close look at are the improving jobs numbers. If job creation for September and October come in stronger than expected, we might very well see some uneasiness in the November meetings.