Update on Fed Rate Hike Plans and Implications for Home Buyers and Sellers

The Federal Reserve Chairman has again announced the plan to make incremental rate hikes to their discount rate which ultimately increases interest rates on new home loans.   Chairman Rosengren foresees the year's third hike coming at the end of September and a fourth by the end of December.  He also suggested that if the economy continues on its current upward trajectory we can anticipate as many as three rate hikes in 2019.  This of course raises home loan interest rates and the cost of home purchases.  And it limits the amount purchasers can borrow which ultimately has a downward effect on home prices.   

To be clear this is not doom and gloom for the housing market as the strong economic growth and very high employment means that prospective buyers will have more money to put down on homes and high employment means that wages will likely continue to rise.   But, for purchasers "on the fence" of a purchase, locking in a lower rate sooner rather than later makes sense.