No change in Interest Rates

No Seven Year Itch for Fed, Key Federal Fund Rate stays the same.

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee (FOMC) chose not to raise interest rates on September’s 16th.  

http://www.cnbc.com/2015/09/15/just-how-the-fed-will-hike-ratesif-it-does.html

Influencing their decision were the rate of inflation and unemployment - two areas that have not yet seen the improvement the Fed is looking for.   The US economy is underperforming compared to other post-recession history.  But with global economics as they are and the US dollar is getting stronger, the Fed sees positive dollar signs which could influence their decision to increase rates in the future.  The next meeting of the FOMC will be held in October or December and there could be a rate increase at that time.  

First American’s chief economist, Mark Flemming doesn’t believe an increase in interest rates would negatively affect the housing market.  He believes that the market would adjust to any increases.    “Rising rates don’t necessarily cause a negative demand shock and falling home prices,” Fleming said. “When the Fed raises interest rates, it’s because the Fed believes that the economy is strong enough to adjust and has the potential to begin overheating — that’s what inflation measures. A stronger economy, more or better jobs, rising wages, increased confidence — these factors all increase demand for housing. In other words, rising rates are indicative of increased home sales and upward pressure on prices.”

Demand for the luxury home market in Naples, FL will not be affected if there is a future increase in interest rates.  In fact, throughout all of Southwest Florida, demand for new and resale homes in all price point continue at a consistent pace.   And remarkably, since 2013, well over half of the monthly closed transactions have been cash.      

 

 

 

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