End of Interest Rate Hikes a Positive Sign for Housing Market Future

Let’s hope the decision by the Federal Reserve last week NOT to raise interest rates for the 18th consecutive time was a long-term strategy. How come? Because reasonable Florida mortgage rates are a key component to the local and national economy.

“This move sends a very positive signal to the housing sector, which has been so robust over the past five years that it has sustained the economy while other sectors have lagged,” says National Association of Realtors President Thomas M. Stevens. “Largely as a direct result of more than two years of interest rate hikes, the housing market today is fragile in some parts of the country. The Fed’s decision indicates that it realizes the vital role housing plays in the economy.”

The decision by the Federal Open Market Committee leaves the banks’ prime lending rate - the benchmark for various consumer and business loans, - at 8.25 percent. Before the Fed started its rate hike agenda in June 2004, the prime had been at 4 percent.

Stevens says the Fed’s decision indicates it realizes the economy has slowed, especially the housing economy. The aim is now to increase Florida mortgage loan demand by ceasing the constant increasing of rates and fees.

“We can’t continue to raise rates without expecting the housing economy to suffer. That translates into higher costs for home buyers, slower sales and a lower level of economic activity in housing, which accounts for one-fourth to one-fifth of the gross domestic product,” he says.

It doesn’t help when closing costs on Florida mortgage loans are also among the highest in the country, but work is being done to lower these, as well.