With the economic recovery in full swing, there has been a lot of talk lately about interest rates and the possibility that an increase could be coming in the near future.
This is a classic good news/bad news scenario: On the one hand, people are going back to work and companies are hiring again. On the other hand, the falling unemployment rate could trigger a spike in the costs of lending and make it tougher for many folks to buy real estate.
Because the Federal Reserve has an indirect impact on mortgage rates, a lot of real estate brokers and professionals tied to the industry are watching the Fed’s every move this year. As the central bank of the world’s largest economy, it has a huge responsibility to stabilize the economy and control inflation.
Real estate is at the heart of all this, along with national employment, GDP, the stock market and other economic indicators.
If unemployment falls enough – perhaps another full percentage point down to the neighborhood of 6.5 percent – that could trigger an increase in interest rates, which will spill into the secondary mortgage markets and eventually to the homebuyers who need the loan. With that cheap credit no longer available, home values in some areas might drop again.